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The rising price of green beans is shaping the future of the coffee industry

From the March 2011 issue.

The high price of coffee is regularly making headlines, but how did this come about and how long will it last?

How times have changed. Nine years later, reports from New York saw Arabica coffee futures selling for $2.76 a pound, the highest in 14 years, with the profits of increased margins trickling down the production chain.

“For growers, these prices are a lot more stimulating,” remarks Jose Sette, Executive Director of the ICO, upon his return from the Eighth Africa Fine Coffee Conference held in Tanzania in February. “They have a better outlook on life at this moment.”

So, what has brought about such a dramatic swing? Relative to the cyclical nature of coffee, Keith Flury, a Senior Commodity Analyst with Rabobank says it has actually been fairly incremental. “We’ve seen a steady stream of bullish factors that have built up on each other,” he explains – supplies have continued to dwindle while demand has steadily increased.

In addition to the poor weather that has been largely attributed for low crop yields, Flury explains that an early crop renovation program by Colombia’s Fedecafe to replace trees that are susceptible to fungus has taken a portion of their coffee trees out of production for four to five years – a significant enough portion to reduce overall output. Add to that the terrible weather, and a country that in 2007–08 produced 12.5 million 60 kilogram bags, was recently down to 8 million, according to the US Department of Agriculture.

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